Q&A Friday #37: The Impact Of Illegals On Poverty And Business

Question: If our economy can absorb 11 million illegals with low paying field, yard, manual labor, maid, cooks, etc.. jobs that no Legal American Citizen is willing to take, then how many more illegals can we take in before things start falling apart? And at what point do those jobs run out before you start undercutting the pay of those jobs for the new illegals that need a job and then what do you do with the illegals that can’t find a replacement job? I forgot….what about all those family members of the illegals?

(As a side note…I have traveled over many parts of Central America and found the people to be kind, hard working, and moral/religious. But we can create a large poor segment that is often poorly educate and become disenfranchised. This is a breading ground for all kinds of crimes and social problems.) — RedFish

“I understand that illegals are breaking our laws and driving wages down and that there are good, hard working legal immigrants who wait their time and follow the structure we have. Wouldn’t, however, cutting out the millions of immigrants in our economic infrastructure handicap our economy? It seems like a sweeping reform that kicked illegals out would also kick out millions of lower paying jobs that could potentially have an effect on many small businesses and other area’s. Not losing the job itself, but the personnel to do the job.” — rossmune

Answer: Let’s apply economics to the illegal alien question.

When illegal aliens flood into a country, they tend to take bottom-of-the-rung jobs that involve manual labor. Because they increase the supply of people willing to fill jobs of that sort, they drive down wages for people in those industries. Eventually, if they drive the wages down enough, Americans may no longer want to do those jobs. There’s no such thing as a job Americans won’t do, but there is such a thing as jobs Americans won’t do at a certain price. Illegals will generally still work at those prices because they can still make considerably more money here, working at what we think of as a very low wage, than they could possibly make in their home countries.

As more illegals come here, the wages paid in industries they become involved in will drop even lower and more industries will look for ways to use them. For example, it was quite interesting, back in February of this year, to hear that coal mining, a job that pays $18 an hour with good benefits, is now supposed to be a job, “Americans won’t do.” Translation: The people running the coal mines want to pay a lot less for their workers and slash benefits.

So, what this all adds up to is that illegal aliens increase poverty in the United States. They’re poor themselves because they work at low paying jobs and often send a lot of money home. They also make the Americans who are already poor even poorer, because they’re competing with them for the same jobs and driving down salaries. I also believe that if we have a guest worker program, we’ll start to see illegals competing with the guest workers who’ll have to pay taxes and will be much more likely to have benefits than illegals. It’s not a pretty picture, unless you’re a crooked businessman who regularly, knowingly, hires on illegals.

But, what happens if we get rid of illegal aliens? The market will adjust like it always does. A small percentage of businesses may go out of business or move their operations overseas. Wages in industries that are currently full of illegals will go up. Some companies will buy more advanced technology to replace their illegal workers and make the legal workers they have more productive. Will this cause a major upheaval for the vast majority of businesses or will American consumers take a hit in the pocket book? No, not at all. (See 9 & 10 here for more details)

Consumers will likely not even be able to notice the difference and the businesses most affected will be — justly, if you ask me — the ones that have been benefitting the most from hiring illegals in the past. Currently, businesses hiring illegal immigrants are getting an illegitimate leg up over their competitors by breaking the law. Sans illegal aliens, all the businesses in fields full of illegals will finally be on a more equal footing.

That’s why we should go after these businesses that are hiring illegals and after they’re forced to finally obey the law, we’ll see most illegals self-deport, and this country will be better off.

*** Update #1 ***:

Hawkins: Consumers will likely not even be able to notice the difference and the businesses most affected will be, justly, if you ask me, the ones that have been benefitting the most from hiring illegals in the past.

“You had me nodding along and agreeing until you said this John. There will be a difference in costs of many things once labor costs spike. One of the sectors very likely to be affected will be our agriculture for example. Cheap illegal immigrant labor has kept those prices up and when they are no longer available these producers will be forced to raise prices to deal with that loss until they can either modernize or move this production offshore..” — AlexinCT

A lot of people believe this, but I’m not one of them. Let me point to a couple of facts from a recent
Rich Lowry column that will help explain why that’s the case.

#1) People tend to WILDLY OVERESTIMATE how many illegals are working in some of these industries. They think that everyone picking fruit, laying bricks, all the maids, are illegals. That’s not the case. From Lowry’s column:

“According to a new survey by the Pew Hispanic Center, illegals make up 24 percent of workers in agriculture, 17 percent in cleaning, 14 percent in construction, and 12 percent in food production. So 86 percent of construction workers, for instance, are either legal immigrants or Americans, despite the fact that this is one of the alleged categories of untouchable jobs.”

As you can see, if all the illegals left, it’s not as if these industries would be starting from scratch.

#2) People also tend WILDLY OVERESTIMATE the percentage of costs that salaries paid to workers represents in a lot of these fields that heavily depend on manual labor. Here’s more from Lowry’s column:

“The average “consumer unit” in the U.S. spends $7 a week on fresh fruit and vegetables, less than is spent on alcohol, according to Martin. On a $1 head of lettuce, the farm worker gets about 6 or 7 cents, roughly 1/15th of the retail price. Even a big run-up in the cost of labor can’t hit the consumer very hard.

Martin recalls that the end of the bracero guest-worker program in the mid-1960s caused a one-year 40 percent wage increase for the United Farm Workers Union. A similar wage increase for legal farm workers today would work out to about a 10-dollar-a-year increase in the average family’s bill for fruit and vegetables. Another thing happened with the end of the bracero program: The processed-tomato industry, which was heavily dependent on guest workers and was supposed to be devastated by their absence, learned how to mechanize and became more productive.”

Even if you had a significant increase in labor costs for a lot of these industries, it will still only make-up a small increase in what consumers have to pay. In other words, lettuce could go from $1.30 a head to a buck $1.35, but it wouldn’t go from $1.30 to $3.00 or some other ridiculously high number.

That increase would also, theoretically, be balanced out somewhat by having less illegals committing crimes and going to prison, using health care without payment, sending their kids to school here for free, getting social services in some form or fashion, etc.

That’s why the vast majority of consumers wouldn’t take a hit in the pocketbook if every illegal left.

*** Update #2 ***:

“A dumb question from a sympathetic Canadian:

So illegal immigrants from Mexico are taking all these low wage jobs that American citizens literally can’t afford to take — the pay is just so low.

I realize the money is better than it is in Mexico, but the illegals don’t live in Mexico anymore. They live in the US, where (I assume) things like rent and food _cost_ more too. So…

How do Mexicans “afford” all those low paying jobs? Are they getting welfare, food stamps, etc??

PS: I would LOVE to get a Green Card and move to the States tomorrow. I feel much more Canadian than American most days. But that will never happen. Too many restrictions. But I promise never to parade down a California street waving a Canadian flag 🙂 (That part of you illegal alian demostrations was bizarre to you, but we see it all the time in Canada, where many people’s first loyalties is to their original country — at least during soccer season, the Olympics, etc).” — Relapsed Catholic

If you think about, poor Americans working in the same industries as “undocumented workers” are “affording” it, so why couldn’t illegals? Plus, illegals aren’t paying for health care. They’re not paying for auto insurance. Some pay income taxes and others don’t, depending on the situation. Moreover, as those of us who’ve lived in cheap apartment complexes can tell you, it’s not unusual to see 7-8 people who can hardly speak English all crammed into a $300 apartment. Are some of them getting government benefits, too? If they have a kid who’s born here, then yes, they can qualify for benefits, with little chance of being deported, even though they’re not Americans.

Add it all up and you may have illegal aliens with more disposable income than Americans making a few bucks more per hour in salary. Also, when you consider that they might be making a dollar a day total, maybe less, back home — before expenses — the money is better for them here.

PS: I’m glad you want to come here. I’d trade all 11 million illegals for you in a hearbeat =D

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